Bank of America: ‘a criminal enterprise’

Nevada Attorney General Catherine Cortez Masto’s amended complaint in a lawsuit against Bank of America has so many interesting nuances, I think I need a new Internet to catalog them all. But let me start by saying that this complaint is a stick of dynamite to the foreclosure fraud settlement, exposing it as a useless whitewash that won’t deter banks from their criminal practices. Masto joins other skeptical AGs here in not acceding to such a dereliction of duty, and instead she lays out a thorough case of systematic fraud, in this case by Bank of America, at every step of the mortgage process.

First, the background. In October 2008, a group of twelve state Attorneys General, including Nevada, entered into a settlement with Bank of America over predatory lending at the mortgage lender Countrywide, which BofA had purchased in July. In the settlement, BofA promised to modify up to 400,000 mortgages nationwide, at a cost of up to $8.4 billion. This was to include principal reductions as well as refinancing, and all foreclosure operations on the affected loans would be suspended.

If any of this sounds familiar, that’s because it’s the same basic structure for the proposed settlement between all 50 AGs and leading banks over their fraudulent foreclosure operations. The question looming over the entire enterprise was whether the states could ensure vigorous enforcement. There’s a model with this Countrywide settlement in 2008 that we can look to. And apparently no AG but Catherine Cortez Masto has actually investigated whether or not BofA kept their promises. Turns out they haven’t. So Masto is seeking a pullout from the settlement, to pursue prosecution against the bank for multiple deceptive practices.

Allow me to highlight the deceptive practices in question. This is going to be a somewhat long excerpt because I want to add as much detail as possible:

In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers’ modification requests were pending and failed to meet the settlement’s 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says […]

The complaint says the bank advised credit reporting agencies that consumers were in default when they were not, and contends that Bank of America employees deceived borrowers about why their requests to modify loans were denied. In addition, it says, the bank falsely claimed that the actual owners of loans had refused to allow changes to their mortgages, and it incorrectly claimed that borrowers had failed to make payments on trial loan modifications when in fact they had. Bank of America also misled borrowers, the Nevada attorney general’s filing noted, by offering loan modifications with one set of terms only to come back with a substantially different deal.

Among the more troubling findings in the Nevada complaint is the contention by several Bank of America employees that the company imposed strict limits on the amount of time they could spend on the phone assisting troubled borrowers seeking help with their loans.

One worker said in a deposition cited in the complaint that employees were punished if they spent more than seven minutes or 10 minutes with a customer. Even though these limits allowed almost no time for assistance, Bank of America employees who did not curtail their conversations were reprimanded, this employee said.

This is a portrait of a criminal enterprise, and to anyone who thinks the other mortgage servicers are somehow more chaste than Bank of America, I have some Bank of America stock to sell you.

Bank of America misrepresented, both in communications with Nevada consumers and in documents they recorded and filed, that they had authority to foreclose upon consumers’ homes as servicer for the trusts that held these mortgages. Defendants knew (and were on notice) that they had never properly transferred [text redacted] these mortgage to those trusts, failing to deliver properly endorsed or assigned mortgage notes as required by the relevant legal contracts and state law. Because the trusts never became holders of these mortgages, Defendants lacked authority to collect or foreclose on their behalf and never should have represented they could.

We know that Countrywide didn’t convey the mortgage notes properly to the trust, their own officials testified to that in Countrywide v. Kemp (which is quoted in the complaint). Masto joins Eric Schneiderman in blowing the whistle on this corrupt securitization enterprise.

The entire complaint is here. Masto is seeking civil penalties of $5,000 per violation in the complaint, upping that to $12,000 when the violation affected a elderly or disabled person. She also wants restitution costs for wrongful foreclosures and the costs incurred by municipalities and homeowners from unnecessarily vacant foreclosed properties. Given that Nevada has so many foreclosures, the total liability could range higher than the original $8.4 billion settlement, and that’s just for Nevada alone.

So much else to say here. Masto’s lawsuit is as much about the current settlement talks as it is about the 2008 Countrywide settlement. She is saying, in no uncertain terms, that you simply cannot trust the banks to actually abide by settlement terms. As Masto says in the complaint, Bank of America’s “misconduct cut across virtually every aspect of the Defendant’s operations,” and they “materially and almost immediately violated the Consent Judgment” agreed upon in the settlement. At the time, Jerry Brown, then Attorney General of California, said that the settlement would “be closely monitored and enforced in the months ahead.” It clearly wasn’t. BofA didn’t wait for the ink to dry before violating the terms. And Masto has not only the accounts of borrowers to back this up, but also testimony from Bank of America employees.

Knowing this, seeing it fully documented in Nevada, how could there still be any negotiations on a settlement with the same people? The negotiation should be about whether there will be a public or private perp walk for BofA executives.

So why hasn’t any other state done the same basic investigation as Nevada, and sought to pull out of the Countrywide settlement? Arizona actually joined this lawsuit back in 2010, but that was when Democrat Terry Goddard was the AG. Republican Tom Horne became the AG after the 2010 elections, and he’s too busy literally trying to overturn the Voting Rights Act to worry about whether or not his constituents are being systematically ripped off by a bank, I guess. (Horne, by the way, is still on the executive committee of the foreclosure fraud settlement, I assume because he doesn’t want to do an investigation, and that’s the prerequisite, it seems.)

As for the others, let me tell you who one of the leaders on the Countrywide settlement was: a guy named Tom Miller, the Attorney General of Iowa and the leader of the 50-state settlement talks on foreclosure fraud. Here’s what he said at the time.

Miller said the Countrywide agreement’s program of loan modifications to prevent foreclosures is a win for all parties. “Foreclosure is the enemy. Most important, loan modifications can help homeowners avoid foreclosures and keep their homes. Avoiding foreclosures also helps the companies, helps communities and neighborhoods, and helps our overall economy by stabilizing the housing market,” he said.

“This is what we have been looking for. This agreement provides for the kind of systematic and streamlined loan modification program that is critical right now,” Miller said. “I strongly urge other servicers to undertake similar aggressive programs to prevent foreclosures.”

Do you think Tom Miller, who wants a foreclosure fraud settlement in the worst way, is going to bother to check to see if BofA managed to actually give Iowans the loan modifications they promised? Of course not. And he’s likely to bully all the other states in the Countrywide agreement to shut up about how that settlement was basically unenforced, because people would get the message that this new settlement would go the same way.

He must have got to all of them, but not Masto. And she has ruined his best wishes, not to mention the best wishes of Bank of America. They are denying any wrongdoing and still claiming that “the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality.” Bullshit. The best way to restore the housing market, the rule of law, and faith in the American system is by rounding up criminal enterprises masquerading as banks.

And the investigation that would lead to that will surely happen now. Masto, Schneiderman and colleagues like Beau Biden, Martha Coakley and anyone else who actually takes their job description seriously will ensure that.
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